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A World on a Diet?

Rising prices on food commodities mark supply and demand deficiencies due to climate change and economic development

In the years of the Roman Empire, emperors attempted to mitigate public grievances by finding refuge in the well-known policy of panem et circences (bread and circuses). Bread represented the symbol of abundance and self-sufficiency as a basic commodity required to cover the nutritional needs of a growing populace. Circuses implied a diversion of public attention from the woes of life through the organisation of grandiose events in the arena as a means to skilfully win popular consent and trust. The era of such strategies seems distant today, especially in the Western world, where abundance and mass consumption are the rule of the day. Yet elsewhere in the world, procurement of basic food stuffs such as grain, rice or wheat is not a given that can be taken for granted, especially as prices are spiking. This development has emerged as a new headache for policy-makers, revealing the truth behind a multi-faceted relationship between economics, politics and climate change.

The complexity of this relationship requires some understanding of economic theory, particularly the concept of scarcity. Scarcity dictates that commodities and resources exist in an environment, but only until a certain quota related to demand and supply is filled. Because these resources cannot always be replenished, new ways to substitute potential losses appears as a necessity in the order of the day.
Regarding food commodities, scarcity is translated into reduced output and subsequently higher prices. Indeed, a recent study conducted by David Lobell, Wolfram Schlenker and Justin Costa-Roberts indicated that global maize and wheat production declined by 3,8% and 5,5% respectively since 1980. The downward trend has apparead despite advances in the technologies used for the cultivation of land and output growth. Inevitably, this led to the prices in commodity to be augmented by 20%, a cost that ultimately the consumer will have to pay in the guise of a loaf of bread, corn flakes or other goods.

Simultaneously, a European Commission paper on the state of the current food crisis notes that climate change is a major source of uncertainty, though it is not universally felt. The statement implies that the impact of climate change on the supply chain of staple goods differs sharply from region to region and from commodity to commodity, thereby adding to its complexity.  For example, while wheat production fell, rice production remained rather stable, a development that is likely to have an uneven impact depending on a country’s dietary culture.

Australia’s dilemma ideally demonstrates the shortfalls in the supply of grains due to severe climate change implications. Ranked as number three in the list of top wheat producing countries, Australia was plagued by three long droughts in the last decade, drastically curtailing its wheat production and thus its exports to the world market.

While droughts and desertification are quite predictable physical phenomena in the sense that they are observable and long lasting processes, other events resulting from climate change are hard to foresee. The fires that destroyed 40% of Russia’s grains harvest in 2010 were an unpredictable event that disrupted grain supply worldwide, for instance. It is such occurrences that suggest weather itself is just the tip of an environmental iceberg and much responsibility also rests on a group of states that are unwilling to take on their share of the collective action in relation to climate change. As a result of the lack of complete co-operation, world stock of wheat and other staples is declining at a rapid pace reflecting the shortages created by weather phenomena and natural disasters. The droughts in Australia alone ushered in a three quarter decline in the world’s wheat stocks, a preponderant decline that should be replenished by increasing output in other staple producing areas.

Apart from the environmental influence on food prices, the economic development and growing ties of interdependence between different regional blocks encourage dietary shifts as crystallised in the cliché categorisation of the BRIC countries – Brazil, Russia, India and China. As the driving forces of growth and development, the emergence of a robust middle class in these countries has altered the nutritional behaviour of its population and put increased pressure on the scale of the demand curve. A World Health Organisation (WHO) study on the global food consumption patterns and trends indicates that per capita supply of energy expressed in kilocalories in East Asia is following a steady upward trend. As the regions intake grows, so does the wheat consumption in countries like India where the annual increase has reached 1.3%, further exerting pressures on the chain of supply and demand.

Another major influence on food prices are the fluctuations of oil prices. The sensitive relationship with the Middle East’s supply-countries and the waves of crises in the region have sparked another round of oil price hikes. These exert inflationary pressures on the euro-zone and beyond, contributing to the growth of food commodity prices. In the past, such growth in the prices of grains has triggered bloody revolutions that had the potential to oust political leaders and governments. The Roman emperors knew that bread was a red line that dictate their fate, or at the very least make it uncertain. Today, growing inequalities between regions and blocks call for a more co-ordinated policy of redistribution on a global level. Without instigating such a move, Westerners will continue to seek out a miracle weight-loss diet, while the Southern hemisphere will continue to live on the brink of famine.

by Kostas Athanasiadis